Little attention seems to have been paid to a critical element of Gov. Schwarzenegger's budget proposal: state workers' pensions. The governor is seeking to establish a far less lucrative pension plan than state workers enjoy now, including raising the retirement age in some categories and opening health care coverage to competitive bidders. Any changes would apply only to new employees.

Gov. Schwarzenegger this afternoon issued a statement threatening a third furlough day for state workers if the Legislature does not produce a budget solution before July 1. The third day would bring the total wage cut for state employees to about 14 percent. The furlough would begin with the July pay period. In a late-afternoon telephone conference with state agencies, the DPA's Julie Chapman said it was possible that if the budget issues are resolved by Wednesday, the furlough would not take effect. It is not clear whether the July furlough days will be self-directed -- in other words, taken at the employee's discretion -- or scheduled statewide; the state agencies are looking into which would be better, Chapman said. If it is enacted, the furlough day would run through June 30, 2010.

In what The Sacramento Bee called "another wasted day," Republican senators united today to defeat the Assembly bills that would have freed up some cash to put off the need for IOUs. In meetings during the morning, the governor had told Republican senators he would veto the bills. Every Republican senator except Abel Maldonado voted against the bills; Maldonado withheld his vote either way. State controller John Chiang says if the budget isn't passed, he will begin issuing IOUs next Wednesday. State workers cannot, by law, be paid in IOUs.

The Assembly passed two bills today -- and is expected to pass a third -- that will free up cash by deferring some state payments to delay the need for IOUs, but the governor vows to veto them. The Senate is expected to pass the bills later today.

If a budget is not adopted by June 30, the state will be forced to issue IOUs to pay its bills for such items as  social services, income tax refunds and vendor and private contractor payments. State workers cannot be paid with IOUs. "Next Wednesday, we start a fiscal year with a massively unbalanced spending plan and a cash shortfall not seen since the Great Depression," Chiang says in a press release. Among the most affected by the IOUs -- officially, registered warrants -- are taxpayers, small businesses and local governments. In addition, resorting to IOUs sends a signal that California has exhausted all other options to manage its cash flow, the press release says. For Sacramento Bee story, click here.

All but three senators, out of 40, have voluntarily cut their pay at least 5 percent, Sacramento Bee Alert reports. Three, Maldonado, Eng and Lowenthal, have take 18 percent pay cuts. The Assembly total wasn't available, but two weeks ago we reported in this blog that 20 percent of the Legislature had voluntarily reduced their pay. Two senators have gone even further. Sens. Wiggins of Santa Rosa and Denham of Merced gave up their state cars. Wiggins bought her Honda hybrid back.

Democratic leaders are promising a "share the pain" budget plan next week that will "close the state's deficit without completely shredding California's social service safety net," The Sacramento Bee reports. The budget conference committee has adopted a plan that balances the budget with some new taxes; Gov. Schwarzenegger said yesterday he will not sign a budget that included any tax or fee increases. Read the full plan here.

A legislative budget committee has rejected the governor's proposal to cut state workers' pay by another 5 percent. In place of the cut, the committee voted to put off paying state workers from June 30 to July 1, a move that would transfer nearly $1 billion of payroll expense into the next fiscal year. The committee did vote to increase cigarette taxes and impose a new tax on oil.

Senate President Pro Tem Darrell Steinberg Tuesday asked his fellow senators to agree to cut their pay 5 percent beginning July 1.

According to today's Sacramento Bee, California will sustain $948 million in spending cuts and $1.8 billion in higher taxes after fiscal leaders announced Friday that the state will not receive enough federal budget relief to avoid those measures.

Sacramento Bee columnist Jon Ortiz reports in his blog that a few publications are calling for public employees to pay more of their pension costs. In "Sharing the Pain" in Government magazine, Girard Miller calls for new formulas in which retirees share the cost of increased pension benefits and increased health premium costs. The San Diego Union-Tribune editorial suggests agencies under CalPERS return to pre-1999 pension plans for new hires (in 1999, CalPERS increased the fretirement ormula to a 3 percent multiplier). And a (Los Angeles area) Daily Breeze editorial favors the riskier defined benefit contribution pension plans (such as 401(k)s).

The Legislative Analyst's Office has published an analysis of Proposition 1A, the May 19 ballot measure that would require the state to make annual contributions to a budget reserve up to a minimum level. It also would limit the use of the reserve in "bad budget" years. Proposition 1A was placed on the ballot as part of the budget negotiations. The analysis also discusses Proposition 1B, which would -- IF Proposition 1A is approved -- allocate general fund revenues to the Supplemental Education Payment Account.

As the keynote speaker at an ACSS board meeting last year, DPA Director Dave Gilb warned that nearly half the state’s supervisors and managers could retire in the next five years. A Bureau of State Audits report released yesterday, and reported by The Sacramento Bee’s State Worker blog, confirms Gilb’s general predictions: Forty-two percent of the state’s leadership and more than 20 percent of its rank-and-file employees may retire in seven years. In the departments surveyed, nearly half the workers were 50 or older. Of even greater concern is that succession plans are just beginning. The blog contains a summary link; read the entire report (pdf) here.

According to The Sacramento Bee's State Worker column today, the California Correctional Peace Officers Association has filed a lawsuit against the governor contending the furloughs are an illegal pay cut. This suit differs from previously filed suits by contending the order can't be executed rather than challenging the governor's authority to issue it. The association says its members will not be able to take off their furlough time.

Mac Taylor, California's legislative analyst, warns the plunging economy could open an $8 billion hole in the state's new budget. That deficit will worsen by $6 billion if voters reject the ballot measures on May 19.